ST. LOUIS • U.S. Rep. William Lacy Clay appeared at a congressional hearing in July to extol the virtues of rent-to-own stores, an industry whose appeal is strengthened by a sour economy.
"It is critical that low-income consumers have access to alternative products and services such as rent-to-own," Clay said. "It gives working-class families opportunities to obtain decent household items without incurring the burden of debt."
Rent-to-own stores have been criticized for offering payment plans that, if followed to completion, require customers to pay far more than an item is worth. But Clay, a Democrat from St. Louis, said the stores offer a transaction that is "easy for the consumer to enter and also easy for the consumer to exit" while providing much-needed credit history.
Less than three months after the hearing, Clay turned to the industry in his time of political need. Bracing for the prospect of his first formidable election challenger in more than a decade, Clay fortified his campaign account with thousands in dollars from rent-to-own executives.
Donors associated with rent-to-own stores gave Clay's campaign more than $24,000 last year. Almost all of those donations came between the beginning of October and the end of December, when the prospect of a contentious re-election battle began to crystallize.
Over the past several years, rent-to-own stores have been among Clay's most steadfast supporters. Executives have feted him at a Nevada casino, spent time with Clay on the golf course and donated computers to students in his district.
Since 2007, the industry has contributed more than $55,000 to Clay's campaign, plus thousands more to a scholarship fund honoring Clay's father, a former congressman.
At the same time, Clay has emerged as a champion for the industry on Capitol Hill. He has twice sponsored a bill that contains key provisions sought by the rent-to-own lobby, such as prohibiting states from requiring stores to disclose interest rates. This session, he is the lead Democratic co-sponsor of a similar bill.
Clay, seeking his seventh term in November, declined repeated interview requests to discuss his support of the rent-to-own industry and its support of him.
He has previously told store owners that the success at advancing their interests is "one of the things I am most proud of."
The head of the trade organization that represents rent-to-own stores says Clay is "passionate about our customers having a chance to better their lives and have nice things."
"I know Rep. Clay because of the fact he is very interested in those without, and interested in those that need an opportunity," said Robert O. Briley, president of the Association of Progressive Rental Organizations. "That's where we agree."
'THE GREATEST CHAMPION'
Clay's commitment to the industry began several years ago after he visited rent-to-own customers and employees at stores in his district, according to "Tiger" John Cleek, who has been active in the rental dealers association.
"It was a favorable visit," said Cleek, a longtime rent-to-own proprietor from Columbia, Mo. "As a result, he began his support of our legislation."
In a 2009 news release, Cleek called Clay "the greatest champion the rent-to-own transaction has ever had."
Asked about his support of the industry, Clay's office provided a written statement he submitted for the House hearing last July, one that mirrored his oral remarks.
In his statement, Clay said "rent-to-own provides a vital service to millions of Americans."
"It is also critical for African-Americans, Latinos and other minorities to have access to alternative products and services, such as rent-to-own," Clay said.
Rent-to-own stores offer customers the option of paying for household items and electronics, from washing machines to computers, in small monthly or even weekly payments. The trade-off is that, over time, customers can end up paying double the value of the merchandise or more.
For instance, National Rent to Own, a Bridgeton-based chain that has stores in Missouri and Illinois, advertises a 60-inch plasma television available for a weekly payment of $45. After two years, the customer can own the television, but the combined total of payments would be nearly $4,700. An almost identical model of television can be purchased for less than $1,500 elsewhere.
National also provides Sony PlayStation3 game consoles for seven monthly payments of $120 each, a total of $840 over the life of the agreement. Target and Walmart offer PlayStation consoles for $250.
Among the criticisms of rent-to-own stores is that they target customers with little financial wherewithal or savvy, making items seem affordable when they are actually drastically overpriced.
"It's such a scummy industry," said Mitch Stoddard, a St. Louis consumer lawyer. "The consumer is not blameless. But you're taking advantage of human nature."
8,600 STORES IN 2009
The number of rent-to-own stores has grown modestly over the last decade, with about 8,600 in operation as of 2009. But the industry has been unable to pass friendly legislation in Congress.
The federal government does not regulate rent-to-own transactions, which means stores are subject to the whims of state officials who can approve onerous restrictions. New Jersey, for instance, has a 30 percent cap on annual interest rates that applies to rent-to-own stores. A federal law would provide a valuable level of consistency for the industry.
"Once we pass federal legislation, our businesses will become even more valuable," says one membership video produced by the industry's trade organization.
Rent-to-own advocates have not been able to get their bill past the Senate, where the industry has met firm opposition from Chuck Schumer, D-N.Y. He has likened rent-to-own companies to "highway bandits" and called them "one of the most despicable industries around."
Since 2007 — the year Clay first introduced the industry-backed Consumer Rental Purchase Agreement Act — rent-to-own and related companies have donated nearly $57,000 to Clay's campaign.
Many of those donations were made in October and December of last year, when Clay apparently began to prep for a potential face-off with a fellow St. Louis Democrat, U.S. Rep. Russ Carnahan.
Carnahan, whose seat was cut in redistricting, has said he will attempt to stay in Congress but has not said in which district he will run.
Many local Democrats believe that Carnahan and Clay may be headed for a heated — and potentially expensive — August primary to decide which one stays on Capitol Hill.
If so, it would be Clay's first formidable election opponent since he replaced his father, former U.S. Rep. Bill Clay Sr., in 2001.
While Carnahan has not received much if any financial support from the industry, he has signed-up as one of many co-sponsors on Clay's current rent-to-own bill, as well as a previous version.
Carnahan has outraised Clay $828,000 to $307,000 in the current election cycle, though he has also spent more, leaving Carnahan with a $62,000 cash advantage over Clay.
In the last three months of 2011, though, Clay raised about $121,000, his best fundraising quarter of the year.
More than $21,000 of that total — about one in every six dollars he raised for the quarter — came from the rent-to-own industry. The next most generous group of donors for the quarter were real estate agents, who hosted a Washington fundraiser for Clay in November and gave him about $9,000 for the reporting period.
Rent-to-own executives from Georgia, Texas, Illinois, Arkansas, Missouri and Massachusetts all donated to Clay in the quarter, including the chief executive of Rent-A-Center and other company officials. Rent-A-Center's political action committee gave Clay $2,500 for the quarter, bringing their total contribution for 2011 to $5,000.
"PACs and individuals generally support candidates and elected officials who share their public-policy views," company spokesman Xavier Dominicis said in a statement. "The Rent-A-Center for Good Government PAC and Rent-A-Center's executives are no exception."
Rental dealers have shown their support for Clay in a variety of ways. In 2007, the rent-to-own trade group kicked off its annual convention at a Reno, Nev., casino hotel with a reception honoring Clay.
In 2008, the organization donated computers to four charter schools in Clay's district. That same year, the rent-to-own group held its annual conference in St. Louis. When Clay addressed the group, he told them "one of the things I am most proud of is our success in advancing the vital interest of the rent-to-own industry."
"I'll always do my best to protect what really matters to you," Clay told the organization, according to coverage from the group's website.
Weeks later, the organization announced that rental dealers had donated $14,000 to sponsor and play in an annual golf tournament raising money for the scholarship fund honoring Clay's father.
A LEAD CO-SPONSOR
Clay reintroduced his rent-to-own bill in 2009, and, again, it was unsuccessful. This session, with Republicans in control of the House, Clay is the lead Democratic co-sponsor of the bill, behind U.S. Rep. Francisco Canseco, R-Texas.
Their legislation, which is still in the committee phase, would require rent-to-own stores to "clearly and conspicuously" display certain information, such as whether the item is new or used, the total number of rental payments necessary to acquire ownership and the amount of each payment.
But the bill would forbid states from requiring rent-to-own stores from disclosing their annual percentage rate, or APR, the standard method for reporting the cost of a loan. The average credit card APR is about 15 percent; many rent-to-own agreements would have an APR surpassing 100 percent.
The bill also would prohibit states from treating rent-to-own contracts as credit transactions, which typically come with more stringent regulations than leases or sales.
Consumer advocate Ed Mierzwinski says the bill is an attempt to trump laws in four states — New Jersey, Wisconsin, Minnesota and Vermont — that treat rent-to-own agreements as credit sales or require stores to disclose an interest rate.
"The purpose of the legislation is only to take away the strong consumer laws in those four states," said Mierzwinski, who is with the Federation of State Public Interest Research Groups. "We believe that Congress should never take away a stronger consumer law, especially at the request of a powerful special interest."
While rent-to-own is often considered a financially imprudent means of obtaining household goods, Briley, the president of the rent-to-own trade group, said the industry's credit-challenged clientele are grateful for the service.
"The whole world turns down this customer," Briley said. "They can't go into Best Buy and buy something."
Rent-to-own contracts are flexible — they can be stopped at any time and typically contain some type of early purchase clause — and do not require a credit check.
Clay is not the only Missourian on Capitol Hill who has backed the changes sought by the rent-to-own industry. U.S. Rep. Blaine Luetkemeyer, R-St. Elizabeth, is a co-sponsor of Clay's bill. He has called it a "common sense solution to the uncertainty that rental purchase dealers and their customers currently face."
Another Missouri Republican, U.S. Sen. Roy Blunt, is a co-sponsor of a Senate version of Clay's bill. Both Luetkemeyer and Blunt have accepted donations from rent-to-own dealers. But neither has received the attention of the industry like Clay.
When rent-to-own dealers held their annual conference in St. Louis in August 2008, Clay was on a foursome with the organization's then-president, Larry Carrico, that finished fifth in the group's golf tournament.
Carrico, chief executive of the Rent One chain, did not reply to a request for comment, but he has not been shy about his praise for Clay.
During the conference in St. Louis, Carrico was outgoing president of the organization when rental dealers, according to the group's website, gave Clay a standing ovation.
"Congressman Clay," Carrico is quoted as saying, "a grateful industry salutes you."
